CULLMAN, Ala. – The U.S. Bureau of Labor Statistics estimates the Decatur area wages have increased by 0.2% from January 2021 – January 2022 while inflation has risen about 8%. Athens State University Economics Professor Jeff Johnson described the process of tracking inflation, “The U.S. Bureau of Labor Statistics (BLS) take a sample of goods, called a market basket of goods, and tracks the prices of those goods over time. Those prices have gone up over the past year about 8% nationwide and about 8.5% in the Southeast.”
“What this means is if your wages have stayed the same from the past year, then you are basically making 8% less than what you did the year before. When I am in class, the example I give to the students is: if your wages were a dollar last year and you could go buy your dollar Coke at McDonalds. With inflation at 8% then that coke is going to cost you $1.08, but if your wages haven’t gone up then you can no longer buy the coke.”
“What this does is put families and individuals in a spot where their standard of living has gone down.”
“Unemployment in Cullman is really good right now. In the U.S., it is about 3.8%. Alabama is about 3.1%, and Cullman is at 2.5%. Low unemployment normally results in higher wages but according to U.S. Bureau of Labor Statistics, the Decatur Area wages have increased by only 0.2% from January 2021 to January 2022. Since the unemployment numbers of Cullman County are similar to Morgan County, wages in Cullman County are probably similar to the Decatur Area wage changes.” Professor Johnson does not believe Cullman County wages have kept up with inflation. “When talking about Cullman County in general, the standard of living has decreased this past year due to inflation being greater than wage increases, but it can vary greatly among individuals,” according to Johnson.
Even with only slight increase in wages, individuals and companies did see a temporary de facto wage increase with the federal government Covid stimulus funds, which can lead to an increase in demand for goods and services which can lead to higher prices.
Johnson says wage increases can be a cause of inflation, though there are several factors currently occurring which has contributed to the inflation. If the Federal Reserve adds too much money to the economy, inflation will occur. Johnson notes, to promote economic recovery after the pandemic shutdowns, the Federal Reserve has attempted to keep interest rates low, leading them to increase the money supply. The U.S. money supply has increased from approximately $4.3 billion in March 2020 to over $20 billion in January 2022.
Johnson also discussed how a lack of supply can lead to inflation, saying, “With the current supply chain issues, many goods and services are limited and the demand is currently stronger than supply. It is kind of like a collectible – what makes a collectible valuable? there are not many of them. This is what we have going on right now in the economy. The limited supply and high demand has been a strong influence on prices contributing to the current inflation rate.”
Johnson finished, saying, “One other main factor is when we shut down during Covid, people didn’t have ways to spend a lot of their money. They still had their regular car payments and power bills, things like that, but they couldn’t go on vacation, they couldn’t go out to eat, they couldn’t go to concerts, they couldn’t go to sporting events, so people saved money during the shutdown. Once we came out of that and things started opening up, people had a lot of money to spend. This also put a strain on supply because so many people created demand for products and services all at once. So, all of these factors have led to the inflation rates that we haven’t seen since the late 70s, early 80s.” It is an inflation rate that has lowered the standard of living and has put a strain on the budgets of many here in Cullman.
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